Social Security Spousal Benefit Question

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gregable
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Social Security Spousal Benefit Question

Post by gregable »

I have a very specific hypothetical example.

Imagine a married couple, with made up names Charlie and Jordan. They have both earned the required minimum social security credits, no divorcees, deaths, etc. The basic social security setup.

Charlie has a Primary Insurance Amount (PIA) of $1,000
Jordan has a Primary Insurance Amount (PIA) of $100.
Both of them have a Norma Retirement Age (NRA/FRA) of 67.

Charlie is 8 years older than Jordan, so by the time Jordan reaches the minimum filing age of 62, Charlie has already filed for benefits.

If Jordan files for benefits at exactly 67, Jordan's total benefit will be $500. This will be $100 of Jordan's own benefit and $1,000 / 2 - $100 = $400 spousal benefit from Charlie's earning record.

What happens instead to Jordan's benefit if Jordan files for benefits at age 70? I can see two possible answers.

1) Jordan's benefit is $500. Spousal benefits don't earn delayed credits, and $500 is the spousal benefit.

2) Jordan's benefit is $524. Jordan's personal benefit of $100 earns 3 years of delayed credits and is increased by 124% to $124. Jordan's spousal benefit does not earn delayed credits, and remains $400.

I couldn't find any clear reference on ssa.gov anywhere. The problem is that text referring to "spousal benefit" in this context could be referring to the $500 number or the $400 number.
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dwickenh
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Re: Social Security Spousal Benefit Question

Post by dwickenh »

I am a student of SS filing and the amount of total benefit can't exceed the spousal benefit(if the spousal benefit is the highest of the two). The chance to claim the spousal benefit and then let yours grow was eliminated for anyone born after Jan 1954.

My opinion is that in this case of yours, the maximum amount for Jordan could be claimed at 67(50% of Charlie's PIA of 1000.00)

500.00 is the max benefit.

I am not an expert!!

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett
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HueyLD
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Re: Social Security Spousal Benefit Question

Post by HueyLD »

dwickenh wrote: Sat Jun 23, 2018 3:32 pm I am a student of SS filing and the amount of total benefit can't exceed the spousal benefit(if the spousal benefit is the highest of the two). The chance to claim the spousal benefit and then let yours grow was eliminated for anyone born after Jan 1954.

My opinion is that in this case of yours, the maximum amount for Jordan could be claimed at 67(50% of Charlie's PIA of 1000.00)

500.00 is the max benefit.
+1.

See https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615694

“RS 00615.694 DRCs in Dual-Entitlement Cases

A. Policy

If a beneficiary is entitled to his/her own RIB with DRCs and to benefits as an auxiliary/survivor, the combined payment amount is computed without consideration of the DRCs. The DRCs are then added to the RIB and that amount is subtracted from the combined payment amount to determine the amount payable as an auxiliary/survivor. See RS 00615.240 for reduced B benefits prior to A benefits.”
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neurosphere
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Re: Social Security Spousal Benefit Question

Post by neurosphere »

HueyLD wrote: Sat Jun 23, 2018 3:47 pm
dwickenh wrote: Sat Jun 23, 2018 3:32 pm I am a student of SS filing and the amount of total benefit can't exceed the spousal benefit(if the spousal benefit is the highest of the two). The chance to claim the spousal benefit and then let yours grow was eliminated for anyone born after Jan 1954.

My opinion is that in this case of yours, the maximum amount for Jordan could be claimed at 67(50% of Charlie's PIA of 1000.00)

500.00 is the max benefit.
+1.

See https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615694

“RS 00615.694 DRCs in Dual-Entitlement Cases

A. Policy

If a beneficiary is entitled to his/her own RIB with DRCs and to benefits as an auxiliary/survivor, the combined payment amount is computed without consideration of the DRCs. The DRCs are then added to the RIB and that amount is subtracted from the combined payment amount to determine the amount payable as an auxiliary/survivor. See RS 00615.240 for reduced B benefits prior to A benefits.”
Thank you both so much for confirming this. I have been researching this same question for quite a while, and could find no confirmation that made sense to me. I'm certain that my eyes had read words which DID answer the question, but that I did not realize I was reading the answer. It's nice to finally have this made explicit, with a reference to the POMS.

I could not find a single other thread on BH where this question was asked/answered definitively. Did I miss one?

Also, while I think all of the information in the wiki is accurate, there are several statements that, when read together, allow for ambiguity or at least allow for misinterpretation by the under-informed (such as me!).

For example, take the following statements cherry-picked from the wiki (https://www.bogleheads.org/wiki/Social_ ... se_benefit):
-- Self and spouse benefits are separate and the calculations are applied to each separately. [Yes, but the delayed credits of a personal benefit can cause the spousal benefit to be decreased compared to otherwise, right?]

-- Your available benefit is the combination of your own benefit and your spouse benefit. [Yes, but the spousal benefit is reduced if you take it early]

-- Any benefit increase or decrease (in percentage terms) due to taking, or deemed to be taking, a self or spouse benefit earlier or later than FRA, is permanent. [Yes, but an increase in the personal benefit is permanent, but that then permanently reduced the spousal benefit by the same amount]

I wonder if it would be appropriate to have an addition example in the wiki, a "case 4", perhaps something like:
Case 4 (wife takes personal benefit at 70, husband not yet taking but takes his benefit later)

-- Wife will get her own full benefit of $1240 ($1000+$240 delayed retirement credits)

-- When husband files, wife will get a spousal benefit of $500 minus the $240 for the delayed credits she receives, for a total spousal benefit of $260.

-- Her combined total benefit = $1240 from age 70 until the time husband files at which point she gets $1240 personal benefit + $260 spousal benefit for a total of $1500.[/list]
Is that correct?
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neurosphere
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Re: Social Security Spousal Benefit Question

Post by neurosphere »

HueyLD wrote: Sat Jun 23, 2018 3:47 pm See https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615694

“RS 00615.694 DRCs in Dual-Entitlement Cases
The link shows the calculation process, and uses terms I very much like. I have always been confused between the term "spouse's benefit" vs "benefit as a spouse" and the ambiguity with the "overall benefit" a spouse will receive after filing for and receiving both a personal and spousal benefit.

I think the terms below (in blue) are the least ambiguous. Perhaps we should all start using them in BH? :wink:

To determine the auxiliary/survivor benefit amount when the RIB MOE is before or the same as the spouse MOE:
Step 1. Determine RIB (without DRCs);
Step 2. Determine unreduced spouse's benefit;
Step 3. Determine spouse excess by subtracting the RIB PIA from the spouse original rate. Reduce if applicable.;
Step 4. Add steps 1 and 3 for total auxiliary payment amount;
Step 5. Add DRCs to step 1;
Step 6. Subtract step 5 from step 4 for reduced spouse's benefit payable.
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dwickenh
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Re: Social Security Spousal Benefit Question

Post by dwickenh »

[Yes, but the delayed credits of a personal benefit can cause the spousal benefit to be decreased compared to otherwise, right?]

1. This statement is true if you understand that the spousal benefit will be added to your own benefit and never exceed 50% of the high
earner's FRA amount. If high earner is getting 3000.00 at FRA, spousal benefit will not exceed 1500.00. If the low earner is already getting
more than 1500.00 on own benefit, spousal will have no effect.

[Yes, but the spousal benefit is reduced if you take it early]

2. This is true. Low benefit earner will always get a % of the high earner's FRA, but claiming it before FRA for the low earner will reduce
the percentage.

Calculator is here.... https://www.ssa.gov/OACT/quickcalc/spouse.html


[Yes, but an increase in the personal benefit is permanent, but that then permanently reduced the spousal benefit by the same amount]

3. This is true. The spousal benefit will be reduced to reflect the maximum amount per statement 1
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neurosphere
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Re: Social Security Spousal Benefit Question

Post by neurosphere »

gregable wrote: Sat Jun 23, 2018 2:30 pm I have a very specific hypothetical example....
[snip]

Charlie has a Primary Insurance Amount (PIA) of $1,000
Jordan has a Primary Insurance Amount (PIA) of $100.
Both of them have a Norma Retirement Age (NRA/FRA) of 67.

Charlie is 8 years older than Jordan, so by the time Jordan reaches the minimum filing age of 62, Charlie has already filed for benefits.

If Jordan files for benefits at exactly 67, Jordan's total benefit will be $500. This will be $100 of Jordan's own benefit and $1,000 / 2 - $100 = $400 spousal benefit from Charlie's earning record.

What happens instead to Jordan's benefit if Jordan files for benefits at age 70?
[snip]

The problem is that text referring to "spousal benefit" in this context could be referring to the $500 number or the $400 number.
Now that we know how SS deals with this, let's put some numbers and terms together. And we'll use the actual steps that SS takes when calculating the amounts.
Step 1. Determine RIB [retirement insurance benefit] (without DRCs [delayed retirement credits]);
Step 2. Determine unreduced spouse's benefit;
Step 3. Determine spouse excess by subtracting the RIB PIA from the spouse original rate. Reduce if applicable.;
Step 4. Add steps 1 and 3 for total auxiliary payment amount;
Step 5. Add DRCs to step 1;
Step 6. Subtract step 5 from step 4 for reduced spouse's benefit payable.
STEP 1: $100. Jordan filed at 70 and Jordan's benefit was $100 + $24 in DRCs. But we don't include the DRCs, the amount to enter here is $100.
STEP 2: $500. The spouse (Charlie's) PIA is $1000. So the (unreduced) spouse's benefit is $500.
STEP 3: $400. The "spouses excess is $500 - $100 = $400. "Reduce if applicable" only applies if spouse files prior to FRA. So this stays $400.
STEP 4: $500. Steps 1+3 add up to a total auxiliary payment of $500.
STEP 5: $124. Adding the $24 of DRCs to step 1 gets us $24 + $100 = $124
STEP 6: $376. Step 4 minus Step 5 is $500 - $124 = $376.

So in this case:
-- Personal benefit is $124.
-- Spouse benefit "payable" is $376.
-- Total payment is $500

And the way my brain uses english to explain/summarize this approach is to say that the total spousal benefit is higher earning spouse's PIA/2, but adjusted down for either of 1) reduction if filing earlier than FRA or 2) subtraction of any DRC on the personal benefit.

So circling back to one of the OP's question "The problem is that text referring to "spousal benefit" in this context could be referring to the $500 number or the $400 number." The answer is "neither". The spousal benefit is $376. :) This is the original max spousal benefit reduced by the DRCs. And the total benefit "as a spouse" is $500. I also agree and get confused because the term "spousal benefit" is sometimes used on BH to refer to the actual spousal benefit but also to the "total benefit one can receive as a spouse".
MrTimewise
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Re: Social Security Spousal Benefit Question

Post by MrTimewise »

STEP 1: $100. Jordan filed at 70 and Jordan's benefit was $100 + $24 in DRCs. But we don't include the DRCs, the amount to enter here is $100.
STEP 2: $500. The spouse (Charlie's) PIA is $1000. So the (unreduced) spouse's benefit is $500.
STEP 3: $400. The "spouses excess is $500 - $100 = $400. "Reduce if applicable" only applies if spouse files prior to FRA. So this stays $400.
STEP 4: $500. Steps 1+3 add up to a total auxiliary payment of $500.
STEP 5: $124. Adding the $24 of DRCs to step 1 gets us $24 + $100 = $124
STEP 6: $376. Step 4 minus Step 5 is $500 - $124 = $376.

So in this case:
-- Personal benefit is $124.
-- Spouse benefit "payable" is $376.
-- Total payment is $500
My thoughts were always, "Why bother with steps 5 and 6 because the end result for the total payment to the spouse is the same as already determined by step 4?" But I suspect this is done to reduce the effect of the "spousal excess" on the maximum family benefit (MFB) available for everyone in the family who qualifies for their portion of the MFB.
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